US private credit firms mark down more loans
U.S. private-credit portfolio values stabilized in Q2 2026 after earlier declines, with lenders marking down software loans and reporting increased non-income-generating debt. BDCs' fair-value-to-cost ratio fell to 97.57% in Q2. Software loans saw 81% markdowns this year, with select borrowers driving losses at firms like Blue Owl, Ares, and Golub.
How this was made
The 30-second read
Why it matters
Sector stress may lead to tighter credit spreads and lower valuations for BDCs, affecting related high‑yield funds.
Market read
The disclosed markdowns underscore heightened risk in the private‑credit space, potentially prompting re‑pricing across related securities.
What to watch
Potential upside from improved credit cycles or successful restructuring of distressed borrowers.
Background
U.S. business development companies (BDCs) have faced redemption pressure and widening spreads, prompting portfolio markdowns.
Ticker impact
Ares Capital Corp. disclosed that two software companies caused over a third of its year‑to‑date unrealized losses.
Potential 2-4% decline as investors reassess exposure.
Concentration of losses in software loans signals higher default risk.
Golub Capital BDC noted losses concentrated in a few junior debt and equity positions.
Possible 1-3% pullback pending further disclosures.
Limited detail on specific borrowers reduces certainty.
FS KKR Capital Corp. reported a handful of investments accounting for most of its markdowns.
Likely modest downside of 1-2% in the short term.
Lack of quantitative loss figures limits impact assessment.
Market effects
Highlights widening stress in the U.S. private‑credit BDC sector, especially software exposure.
May dampen investor appetite for mid‑cap credit vehicles across the U.S. market.
Signals broader credit quality concerns that could affect global high‑yield investors.
Counterpoint
If software loan write‑downs are already priced in, BDCs could become attractive yield picks.
Key entities
- CompanyBlue Owl Capital Corp.
BDC reporting a specific credit markdown.
- CompanyAres Capital Corp.
BDC with concentrated software loan losses.
- CompanyGolub Capital BDC
BDC with losses in junior debt positions.
- CompanyFS KKR Capital Corp.
BDC noting a handful of investments driving markdowns.
